1. KENYA’S COMPETITIVENESS IN BUSINESS BY JULIUS KIPNGETICH MANAGING DIRECTOR INVESTMENT PROMOTION CENTRE

2. AFRICA AT A GLANCE The continent’s size is to equivalent to  USA  China  India  Argentina  Western Europe  New Zealand Has a population of 740 million Is endowed with vast natural resources Has a huge debt Has a small GDP size 2/3 of the population is young and dynamic Its violent and turbulent past is coming to an end

3. Kenya at a glance  Has a GDP of $11 billion  Population is 31.5 million  Per capita of $350  16% of the GDP is savings  75% of employment is in agriculture, 24% of GDP  Tourism earns Kshs. 24 billion, 12% of GDP  Manufacturing accounts for 14%, largest base in COMESA  ICT is the fastest growing sector in the economy  Financial & diplomatic capital of the region  Aviation hub of the region courtesy of Kenya Airways  Busiest port of the region at Kilindini  Best educated workforce in Sub-sahara  Highest concentration of Olympians in the world

4. Kenya’s investment priority areas  Agriculture and agro-processing  Tourism  Manufacturing  Professional services  ICT  Financial & Banking  Medical  Trade  Knowledge-based industries  Privatisation of state enterprises  Mainly infrastructure parastatals

5. Main Types of FDI  Resource seeking FDI in natural resources FDI seeking low cost or specialised labour  Market seeking FDI into markets previously served by exports or closed FDI by supplier companies following customers overseas FDI aims to adopt products to local tastes or use resources  Efficiency seeking Rationalized or integrated operations leading to cross-border specialization  Strategic asset seeking Acquisitions and alliances

6. Determinants of FDI inflows  Political stability and predictability  Labour conditions  Legal environment  Size of the market  Openness of the economy  Infrastructure and other support services  Incentives  Degree of globalisation

7. DISTRIBUTION OF FDI INFLOWS- 2001  European Union44%  USA17%  Asia/Pacific14%  Latin America/ Caribbean 12%  Africa02%  Japan01%  Others10%

8. Africa’s top 10 FDI destinations ($ billions) - 2001  South Africa7  Morocco3  Algeria1.2  Angola1.1  Nigeria1.1  Sudan0.6  Egypt0.6  Tunisia0.6  Ivory Coast0.25  Mozambique0.25

9. Inward FDI flows for Kenya, Uganda, Tanzania & S. Africa ($ million) Year Kenya Uganda Tanzania S. Africa 1998 42 210 172 561 1999 42 222 517 1,502 2000 127 254 463 888 2001 50 229 327 6,789 2002 50 275 240 754

10. Outward FDI flows for Kenya, Uganda, Tanzania & S. Africa ($ million) Year Kenya Uganda Tanzania S. Africa 1998 14 20 - 1,779 1999 30 - 8 - 1,580 2000 29 - 28 1 271 2001 50 - 5 - - 3,180 2002 76 -14 - - 401

11. KENYA’S COMPETITIVENESS AS A PREFERRED FDI DESTINATION ( 1 ) denotes negative perception and ( 4 ) denotes no impact on deciding investment destination

12. Kenya’s competitiveness as a preferred FDI destination

13. Kenya’s competitiveness as a preferred FDI destination Contd.

19. Average Score in competitiveness

20. CORPORATE TAX RATES (%)  Kenya 30  China30  Indonesia 30  Malaysia 28  Philippines32  Thailand 30  Vietnam25

21. TELECOMMUNICATIONS KENYA SELECTED COUNTRIES US$/minute to US  Private landphone (Local calls 0-60 km) US$ 0.02 per minute  Trunk calls US$ 0.08 – 0.25 per minute  International calls - US US$ 1.25 per minute  Indonesia 1.00  Malaysia 0.24  Philippines0.30  Thailand 0.56  China 0.25  Vietnam 1.30

22. WATER RATES KENYA SELECTED ASIAN COUNTRIES Water (US$/m³)  0-10,000 litres US$ 0.16 per 1,000litres  10,000 – 30,000 litres US$ 0.24 per 1,000litres  30,000 – 60,000 litres US$ 0.36 per 1,000litres  Over 60,000litres US$ 0.45 per 1,000 litres  China 0.21  Indonesia0.59  Malaysia 0.51  Philippines 0.21  Thailand 0.31  Vietnam 0.25

23. REASONS FOR KENYA’S LOSS OF FDI COMPETITIVENESS  Turbulent political environment in the last decade  Stand-off with development partners especially IMF  Low economic growth  Corruption and insecurity  Inadequate infrastructure supply  Inefficient public service  Low quality of life  Lack of political will to change in the past  Lack of enabling legal frame work  Poor perception of Africa as a whole

24. Achievements since the Government took over  Smooth transition of power in 2002  Emerging positive image of Kenya worldwide  Restoration of relations with development partners  Increased confidence of the population and general optimism about the future  Major review of govt policies in many sectors  Facing the excesses of the past & zero tolerance for corruption  Widening of the democratic space  Conclusion of the constitutional talks  Inclusion in NEPAD group of 4  Increased interest in Kenya as a trade, investment and tourism destination

25. What remains to be done  Reorientation of the entire public service  Retooling & separation  E-governance  Process thinking  Passing of 2 crucial bills  Investment code  Privatisation bill  Reduction of the cost of doing business  Electricity, oil & gas  Roads, railways & ports  Telecommunications  Security & safety  Privatisation of state enterprises  Widening & deepening of the fight against corruption  Debt restructuring & forgiveness  Positioning Kenya as the premier black Africa nation